Question

=2294697&calOdnb=0 Mail - Lindsey Spice Sign in D ULOT I V M McGraw-Hill Conne... New Tab Time Left:1:16:30 Lindsey Spicer: Attempt 1 Question 34 (2.5 points) Ice cream vendors on the beach fail to cooperate with one another on the quantity of ice creams they should sell to earn monopoly profits. A consequence of their failure is that, relative to the outcome the vendors would like, (i)the quantity of ice creams supplied is closer to the socially optimal level. (ii)the price of ice creams is closer to marginal cost. (iii) the ice creams market at the beach is less competitive. OC) and (ii) (ii) and (iii) (i) and (iii) (iii) only Question 35 (2.5 points) In the figure below, panel (a) depicts the linear marginal cost of a firm in a competitive market, and panel (b) depicts the linear market supply curve for a market with a fixed number of identical firms. 300 PM

Answer 1

Question 34:

It shall be noted that ice-cream vendors at the beach fails to co-operate on the quantity of ice-cream that should be sold in order to earn monopoly profits.

Thus, it is not possible to fix the supply of the quantity as that is possibly under monopoly condition..

There would be an increased supply of the ice-cream than what the monopoly conditions would warrant.

Secondly, the price would be lower than what would exist under monopoly conditions. There would be competition relatively larger than no competition situation that would exist under monopoly conditions.

It shall be noted that under monopoly condition, the firm charges a price as large as that follows from the aggregate demand curve in the market at a given level of quantity supplied. This is no longer possible when ice-cream vendors at the beach fails to co-operate on the quantity of ice-cream that should be sold in order to earn monopoly profits.

Thus, ice-cream market at beach would become relatively more competitive. Hence, the option (iii) is ruled out.

Hence, the correct answer is (i) and (ii)